Article I of the U.S. Constitution grants Congress the power to appropriate funds from the Treasury, pay the
obligations of and raise revenue for the federal government, and publish statements and accounts of all financial

By law, Congress is also obligated to write a budget representing its plan to carry out these transactions in the
forthcoming fiscal years. While the President is required to propose his administration’s budget requests for
Congress’s consideration, Congress alone is responsible for writing the laws that raise revenues, appropriate
funds, and prioritize taxpayer dollars within an overall federal budget.

The budget resolution is the only legislative vehicle that views government comprehensively. It provides the
framework for the consideration of other legislation. Ultimately, a budget is much more than a series of
numbers. It also serves as an expression of Congress’s principles, vision and philosophy of governing.

This Budget Resolution for Fiscal Year 2012 intends to recommit the nation fully to the timeless principles of
American government enshrined in the U.S. Constitution – liberty, limited government, and equality under the
rule of law. It seeks to guide policies by those principles, freeing the nation from the crushing burden of debt that
is now threatening its future.

This budget is submitted, as prescribed by law, to apply these principles, reflect this vision, and provide a
framework for the orderly execution of Congress’s constitutional duties for Fiscal Year 2012 and beyond.

House Budget Committee | April 5, 2011


4 trillion compared to the President’s budget over the next decade. House Budget Committee | April 5.5 million additional private-sector jobs in the last year of the decade. SUMMARY OF THE FISCAL YEAR 2012 BUDGET RESOLUTION Where the President has failed. Unleashes prosperity and economic security. less burdensome tax code for households and small businesses. 2011 4 . House Republicans will lead. in which spending never falls below 23 percent of GDP over the next decade. applying the nation’s timeless principles to this generation’s greatest challenge. PATIENT-CENTERED HEALTH CARE: Repeals and defunds the President’s health care law. yielding $1. TAXES Keeps taxes low so the economy can grow. and results in 2. Sets top rates for individuals and businesses at 25 percent. businesses and families. REAL SECURITY: Fulfills the mission of health and retirement security for all Americans by making the tough decisions necessary to save critical health and retirement programs. and $5.2 trillion in government spending over the next decade compared to the President’s budget.1 trillion in higher wages and an average $1. Eliminates hundreds of duplicative programs. Locks in spending cuts with spending controls. and lifts the crushing burden of debt. DEBT AND DEFICITS Reduces deficits by $4. Improves incentives for growth. advancing instead common-sense solutions focused on lowering costs. stops spending money the government doesn’t have. a sharp contrast to the President’s budget. Brings government spending to below 20 percent of the economy. GROWTH AND JOBS Creates nearly 1 million new private-sector jobs next year.This budget helps spur job creation today. reflects the ban on earmarks. Spurs economic growth. Calls for a simpler.This plan puts the budget on the path to balance and the economy on the path to prosperity. Lowers tax rates for individuals. more prosperous America. Surpasses the President’s low benchmark of sustainability – which his own budget fails to meet – by reaching primary balance in 2015.000 per year in higher income for each family. expanding access and protecting the doctor-patient relationship. and investment. Prevents the $1. KEY OBJECTIVES ECONOMIC GROWTH AND JOB CREATION: Fosters a better environment for private-sector job creation by lifting debt-fueled uncertainty and advancing pro-growth tax reforms. Ensures that the next generation inherits a stronger. Eliminates roughly $800 billion in tax increases imposed by the President’s health care law. KEY FACTS SPENDING Cuts $6.8 trillion relative to the current-policy baseline.5 trillion over the decade.5 trillion tax increase called for in the President’s budget. savings. RESTORING AMERICA’S EXCEPTIONAL PROMISE: Tackles the existential threat posed by rapidly growing government and debt. brings the unemployment rate down to 4 percent by 2015. and curbs corporate welfare bringing non-security discretionary spending to below 2008 levels. Puts the budget on the path to balance and pays off the debt. increasing real GDP by $1. SPENDING CUTS AND CONTROLS: Stops Washington from spending money it does not have on government programs that do not work.

invest. and innovate in the United States by lowering the corporate tax rate from 35 percent. Targets hundreds of government programs that have outlived their usefulness. Strengthening the Social Safety Net Repairing a Broken Medicaid System: Ends an onerous. addressing not only what Washington spends. to a more competitive 25 percent. Corporate Tax Reform: Improves incentives for job creators to work. reinvesting $100 billion in higher military priorities and dedicating the rest to deficit reduction. accountable career scholarships aimed at empowering American workers to compete in the global economy. Ending Corporate Welfare: Ends the taxpayer bailouts of failed financial institutions. reforms Fannie Mae and Freddie Mac. Reduces the bureaucracy’s reach by applying private-sector realities to the federal government’s civilian workforce. KEY COMPONENTS Efficient. unlocks American energy production to help lower costs. one-size-fits-all approach by converting the federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to the specific needs of their residents. and reduce dependence on foreign fossil fuels. Boosting American Energy Resources: Removes barriers to safe. Changing Washington’s Culture of Spending: Locks in savings with enforceable spending caps and budget- process reforms. responsible energy exploration in the United States. Preparing the Workforce for a 21st Century Economy: Consolidates the complex maze of dozens of overlapping job-training programs into more accessible. Repeals the new health care law and moves toward patient-centered reform. Fulfilling the Mission of Health and Retirement Security Saving Medicare: Protects those in and near retirement from any disruptions and offers future beneficiaries the same kind of health-care options now enjoyed by members of Congress. create jobs. Promoting Economic Growth and Job Creation Individual Tax Reform: Simplifies the broken tax code. lowering rates and clearing out the burdensome tangle of loopholes that distort economic activity. brings the top rate from 35 to 25 percent to promote growth and job creation. but also how tax dollars are spent. House Budget Committee | April 5. Streamlining Other Government Agencies: Returns non-security discretionary spending to below 2008 levels. Advancing Social Security Solutions: Forces action by the President and both chambers of Congress to ensure the solvency of this critical program. Effective and Responsible Government Prioritizing National Security: Reflects $178 billion in savings identified by Defense Secretary Robert Gates. and stops Washington from picking the winners and losers across sectors of the economy. which is the highest in the industrialized world. 2011 5 .

creates nearly 1 million new debt and government spending – private-sector jobs next year. Data Analysis.1 trillion to the debt over the to the President’s budget.4 trillion the fourth straight deficit exceeding relative to President’s budget. Accelerates a debt-fueled over time economic crisis Health Care Repeals the job-destroying health care law Accelerates the job-destroying health care law Jobs According to the Heritage Center for Accelerates tax hikes. Reforms Imposes a $1. 2011 6 . drops below 23 percent. $5. Commits to 15 percent of GDP in 2050 the explosive growth of government Deficit Brings deficits under $1 trillion in $1. pre- bailout levels Taxes Stops all of President’s taxes. Reduces deficits $4. Brings policies that result in slower unemployment rate down to 4 percent in economic growth and fewer American 2015 jobs House Budget Committee | April 5. global competitiveness driving jobs overseas Size of Government Brings government down to below 20 Spending as a percent of GDP never percent of GDP by 2015. Pays off the debt next decade. health care law.5 trillion tax the broken tax code increase Corporate Tax Lowers the corporate tax rate to 25 Leaves in place the highest corporate percent to promote job creation and tax rate in the developed world. A CONTRAST IN BUDGETS The Path to Prosperity President’s FY2012 Budget Spending Cuts $6. Puts the the $1 trillion mark budget on a path to balance Primary Balance Primary balance (spending – interest Never reaches primary balance – payments = revenue) is reached in 2015 failing to clear even the low bar the administration set for itself Debt Held by Public Reduces the debt by $4.2 trillion in spending cuts relative $400 billion in new spending to President’s budget.7 trillion relative Adds $9.2 trillion deficit in FY2012 marks FY2012.8 trillion in above CBO’s current-policy spending cuts relative to CBO’s baseline current-policy baseline Spending Levels Brings non-security discretionary Locks in reckless spending spree spending to below pre-stimulus.

House Budget Committee | April 5. 2011 7 .

CHOICE OF TWO FUTURES House Budget Committee | April 5. 2011 8 .

They deserve the truth about the nation’s fiscal and economic challenges. toward a debt-fueled economic crisis and the demise of America’s exceptional promise. right at this moment. led the nation downhill. the last Congress took actions that further undermined them. both political parties have squandered the public’s trust. economic. yet failed to deliver on its promises to create jobs. House Budget Committee | April 5. and moral imperatives by confronting the nation’s most urgent fiscal challenges. 2011 9 . A government that allows economic destinies to be determined by political considerations rather than merit cannot lead the world in productivity and growth. and entrepreneurs. and irresponsible leadership. and borrowing that are leading America. keeping America’s promises to seniors. A government that buries the next generation under an avalanche of debt cannot claim the moral high ground in the world. limited government. It disavows the relentless government spending. But a government that loses its sovereignty to its bondholders cannot long guarantee its people’s prosperity – or secure their freedom. investors. This budget resolution reflects that choice. Government at all levels is mired in debt. INTRODUCTION Americans face a monumental choice about the future of their country. and life in the republic goes on. It chooses instead a path to prosperity – by limiting government to its core constitutional roles. At a time when the free-market foundations of the American economy were in desperate need of restoration and repair. Only recently. and unleashing the genius of America’s workers. The American people ended a unified Republican majority in 2006. taxing. and equality under the rule of law. heeds America’s political. Political parties lose elections. self-reliant. This Path to Prosperity draws upon solutions from across the political spectrum and builds upon the important work of the President’s bipartisan Commission on Fiscal Responsibility and Reform. In recent years. policymakers in Washington have traveled the path of least resistance – a path that has. They reject empty promises from a government that cannot live within its means. The President and his party’s leaders embarked on a stimulus spending spree that added hundreds of billions of dollars to the debt. Mismanagement and overspending have left the nation on the brink of bankruptcy. Acute economic hardship was exploited to enact unprecedented expansions of government power. For too long. This budget. and hard-working citizens. They deserve – and demand – honest leaders willing to stand for solutions. This did not sit well with the American people. The Path to Prosperity. The empty promises made by Washington over the years have resulted in economic hardships today and increasing pessimism about tomorrow. Citizens stood up and demanded that their leaders reacquaint themselves with America’s founding ideals of liberty. perverse incentives. And a government that promotes dependency and undermines the institutions of faith and family will inevitably weaken the nation’s greatest strength: the exceptional character of its entrepreneurial. This crisis squandered the nation’s savings and crippled its economy. unsurprisingly. millions of American families saw their dreams destroyed in a financial disaster caused by misguided policies. Americans reject leaders who focus on the pursuit of power at the expense of principle. Congress can no longer afford to ignore these demands. just as they ended a unified Democratic majority last fall.

This budget rejects a culture of complacency. America is a nation conceived in liberty.This Path to Prosperity reflects input from leaders at the state and local level. In the words of Abraham Lincoln. In all the chapters of human history. this Path to Prosperity calls for a government faithful to its limited but noble mission: securing every American’s right to pursue a destiny of his or her choosing. and to preserve its promise for the next generation. dedicated to equality.” Will this be remembered as the Congress that did nothing as the nation slouched toward a preventable debt crisis and irreversible decline? Or will it instead be remembered as the Congress that did the hard work of preventing that crisis – the one that chose the path to prosperity? Decline is antithetical to the American Idea. We of this Congress and this Administration will be remembered in spite of ourselves. and American citizens calling for honest leadership and real solutions. House Budget Committee | April 5. and aims to restore the dynamism that has defined America over the generations. fulfilling the mission of health and retirement security for all Americans. This Path to Prosperity applies America’s timeless principles to today’s greatest challenges by committing to three key goals: lifting the crushing burden of debt. and strengthening the foundations of economic growth and job creation. “We cannot escape history. offers reforms that promote initiative by rewarding effort. 2011 10 . there has never been anything quite like America. and defined by limitless opportunity. This budget’s goal is to keep it exceptional. economists and experts who have testified before the House Budget Committee. Above all.

and funding for most government agencies. Defense spending as a share of the budget has fallen from around 25 percent thirty years ago to around 20 percent today. the 2009 stimulus law has gotten the most attention. Since January of 2009. While American families have been tightening their belts. 2011 11 . Of the many new laws that made up the recent spending spree. with considerable focus on the billions of dollars it wasted on dubious government projects as well as the many promises it broke with respect to job creation and economic growth. these agencies have been the beneficiaries of a major spending spree over the last two years. there has been a 24 percent increase in this slice of the pie – a number that jumps to 84 percent when stimulus funds are included. Like all categories of government spending. But responsible budgeting must never lose sight of the fact that the first responsibility of the federal government is to provide for the defense of the nation. The Government Accountability Office (GAO) – the non- House Budget Committee | April 5. COMPONENTS OF THE FEDERAL BUDGET Before laying out a vision for the future of the country – for that is what a federal budget is – it is first necessary to provide an honest assessment of the facts. This category includes transportation. An inevitable consequence of the last Congress’s decision to ramp up spending so quickly was that billions of Americans’ hard-earned tax dollars were squandered. Understanding how the government spends the money it takes in by taxing and borrowing is the first step toward the goal of reversing the tide of red ink and getting the economy growing again. But domestic government agencies also received large increases in their base budgets – the Environmental Protection Agency (EPA). but it is important to put that number into perspective. defense spending should be executed with greater efficiency and accountability. foreign aid. energy. education. The category in Figure 1 labeled “non-defense discretionary spending” is primarily devoted to funding other government agencies. received a 36 percent budget increase in just two short years. That understanding begins with the elements of the federal budget: Annually Approved Spending Discretionary spending – FIGURE 1 funding debated and approved annually by Congress and the President – accounted for slightly less than 40 percent of all federal spending in 2010. Over half of this category goes toward national defense. for example.

items/d11318sp. and Medicaid. annually appropriate or properly scrutinize this category of spending. There are three key forces driving Social Security. which means that current workers’ Social Security taxes are used to pay benefits for current retirees.partisan agency that audits the government’s books – recently found between $100 billion to $200 billion in duplication. Autopilot Spending Programs that have “autopilot” spending authority under existing law make up the rest of the budget. Simply put. and the House continues to push the Senate and the President to bring spending under control for the remainder of the current fiscal year. This category includes food stamps. Unlike defense. Demographics The first is demographic. these programs were created with a 20th-century economy in mind. The Path to Prosperity builds on these efforts to cut They were not designed for the new demographic and economic challenges of the 21st century. the House of Representatives voted to return spending on domestic government agencies to their pre-stimulus levels. http://www. 2011 12 . But getting discretionary spending under control is only a first step toward fiscal sustainability.gao. Congress does not regularly debate. Congress created these programs in the middle decades of the last century in response to a problem that has preoccupied American lawmakers for over a century: How can government best preserve the freedom to risk and to dare. and Enhance Revenue. unemployment benefits. it is usually referred to as “mandatory spending. and farm subsidies – programs that are frequently referred to as “entitlement programs. while providing a safety net for those citizens who meet with misfortune along the way? For decades. Social Security. he or she automatically receives – or “is legally entitled” – to the benefit. the share of the budget that goes to these entitlement programs is growing rapidly. Save Tax Dollars. Opportunities to Reduce Potential Duplication in Government Programs. even though some of them affect one program more than the others. Medicare and Medicaid into bankruptcy. Social Security is financed through a pay-as-you-go system. Unless action is taken to reform these programs. Medicare and Medicaid all face structural problems that are driving them – and the country – into bankruptcy.pdf House Budget Committee | April 5. they will continue to crowd out all other national priorities until they break the federal budget. while Medicaid has sought to ensure that low-income Americans would not go without essential health care. In 1935 when Social Security was enacted. In 1970. for 1Government Accountability Office. This problem is most clearly seen in the financing for Social Security. these major entitlements consumed about 30 percent of the budget – a number that has grown to over 40 percent today (see Figure 1). there were about 42 working-age Americans for each retiree.1 Clearly.” The three largest entitlement programs are Social Security. ensuring government can efficiently and effectively meet its proper responsibilities. As illustrated in Figure 1. Already this year. If an individual meets legal eligibility requirements for these government programs. and waste in federal spending. Because permanent law governs the funding levels of programs in this category. in pursuit of dreams large and small. seniors have been able to rely on Social Security and Medicare for their basic retirement needs. March 2011. The real drivers of the nation’s debt lie elsewhere. Medicare. autopilot spending accounted for around 60 percent of all federal spending in 2010. The average life expectancy for men in America was 60 years.” even though Congress can change the law at any time. But Americans will not be able to rely on these programs for much longer unless Congress repairs and reforms them. overlap. All three are interrelated. Congress must restore discipline to this category.

much of the government’s money gets wasted – and shows up as inflation in the cost of care.8 years.women it was 64. By 2030. Because of the design and structure of these programs. Real reform – especially with respect to Social Security – must reflect demographic reality. toward Social Security recipients. and are expected to grow further. To put this in perspective. Currently. In 2009. Everyone who is on Medicare or knows someone on Medicare has stories about waste in the system – unnecessary tests. each wage earner will be paying for nearly half of each retired person’s full benefits. when Social Security was first enacted in 1935. redundant treatments. was contributing less than 2. But these programs aren’t just affected by rapidly rising health-care costs – they are actually a key driver of inflation in the health-care sector. 2011 13 . life expectancies have lengthened to an average of 75 years for men and 80 years for women. For much of the last two years. there has also been a demographic shift to a lower retirement age. compared to around 1 percent for all other goods and services. on average. This is putting enormous pressure on Medicare and Medicaid. health-care costs rose by over 7 percent. however. With these FIGURE 2 demographics. Washington has been embroiled in a bruising debate over a law that was supposed to provide a “comprehensive” solution to the nation’s health-care problems by putting even more of the health sector under government control. each worker. there were 3. At the same time. since the creation of the program. state or local government. it was easy for the program to generate sufficient revenue to meet its promises to those over 65. The explosion of payments in the 75 years since the Social Security system was enacted will be dwarfed by the demographic demands about to come.Yet rapidly rising health-care costs remain as big a problem as ever. This represents a massive shift of earnings away from younger families trying to build their futures. Economics The second force is economic. the average age of retirement was 69. No economy can grow and thrive under that heavy a tax burden. it was 63. In 1945. The demographic situation has changed dramatically. The first members of the baby-boom generation – those born between 1946 and 1964 – are already eligible for early retirement. thanks to innovations in medical technology and health care. In 2010. Nearly 50 cents of every dollar spent on health care in this country is spent by federal. In 1950.6 years.5 percent of one retiree’s benefits. and the cost in both time and money of mistaken billings and misplaced House Budget Committee | April 5. Not only is our nation aging.5 million beneficiaries. there are over 50 million beneficiaries – an over fourteen-fold increase.

At the same time. This leads to waste and fraud on a massive scale. and it’s a big reason that costs have spiraled out of control. states are not given the flexibility to design their Medicaid programs in smart or efficient ways. And it will dramatically expand a Medicaid program that is already breaking state budgets and adding to a growing flood of red ink at the federal level. Its so-called cost controls amount to the same kind of fee-for-service reductions that have failed to control costs in Medicare for decades. with its large expansions of Medicaid. controls. it is often the case that their only option is to impose across-the-board reductions in reimbursements to doctors. America’s health-care entitlements are currently set up as open-ended. with most of the power concentrated at the federal level. 2011 14 . but few have been willing to propose real solutions. as has happened in many states. including the military. local and individual level? The current incentive structure. government-run system. This results in more demands to increase federal subsidies and control. The new health care law. (Providers predictably increase the number of services provided for each condition as the government lowers fees). Already. As a result. Figure 3 makes it very clear that. where should power reside? Should it be centralized in the hands of federal bureaucrats. drives the heedless expansion of these programs and therefore the growth of health-care costs for all Americans. Social Security. blank-check commitments to reimburse health-care providers for services – and this very structure raises costs and reduces efficiency. particularly with regard to Medicaid. which leave many doctors unwilling to see Medicaid patients. These incentives encourage states to expand the program beyond those who are truly in need. Real reform – especially with respect to Medicaid – must give states the flexibility they need to better assist their most vulnerable populations. Moreover. Worse. Making do without any federal government departments. As government increases subsidies and control over the price and delivery of health care. At that point. and it pushes quality health care out of reach for those who are not eligible for federal programs. it saps the system of innovation and efficiency. Because the federal government matches every state dollar spent on the program. Skewed political incentives have proved especially damaging in the Medicaid program. will funnel more people into a broken system. health insurance companies have announced big premium hikes related to the law’s new mandates. Empty promises Policymakers have known about these problems for decades. tax hikes and subsidies – exacerbates this flawed model and will push costs further in the wrong direction. Last year’s health-care law – with its maze of mandates. is not really House Budget Committee | April 5. or decentralized across the country at the state. absent action. When even their smaller share of the tab becomes unaffordable. every dollar in Medicaid expenditures cut from state budgets triggers more than a dollar worth of cuts in federal funding. In this country. boils down to a question of control. Real reform – especially with respect to Medicare – must eliminate this unsustainable waste and reduce inefficiencies and costs by giving beneficiaries themselves more control over their own health-care benefits and decisions. Any effort to propose significant reforms to these programs triggers a barrage of demagoguery and entrenched resistance. dictates. Medicare and Medicaid will soon grow to consume every dollar of revenue that the government raises in taxes. Blank- check commitments create perverse incentives for everyone in the health-care system to maximize his or her share of this apparently limitless government subsidy. these patients are left with fewer options and lower- quality care. states do not pay the full cost of expanding the program. policymakers would be left with no good options. Skewed political incentives The third force. This kind of waste is inevitable in a top-down.records.

workers lost promised benefits when their employers failed to take timely. when the Social Security trust fund runs out of assets and payroll taxes are not sufficient to cover benefits owed. it will lose even the ability to make such choices on its own terms. FIGURE 4 Unless Congress acts. Of course. Each year that Congress fails to act. government gets closer to breaking promises to current retirees while adding to a growing pile of empty promises made to future generations. and neither is raising taxes to a level that no free and prospering economy could sustain. In industries such as steel. Under current law. Americans can expect the same thing to happen to Social Security and Medicare. and a crushing tax burden on young families. The government’s unfunded liabilities – promises the government makes to current workers about their health and retirement security for which it has no means to pay – are growing by trillions of dollars a year. Medicare is on a similarly unsustainable path – the Medicare trend line illustrated in Figure 3 is a mathematical impossibility. 20th-century benefit structures. Social Security benefits are scheduled to be cut by 22 percent in 2037. America has seen unfunded obligations much. The foreign governments and institutional lenders that finance America’s debt would cut up the nation’s credit cards before things got that far. 2011 15 . aviation and autos. steep cuts in entitlement benefits to current seniors. much less severe than these take down some of its proudest companies. less help for the poor. if Congress continues to delay. the U.S.FIGURE 3 option at all. responsible steps to update their unworkable. That would mean sudden. Many retirees lost the critical health and retirement benefits that they were counting on. Future benefit cuts – against a backdrop of skyrocketing House Budget Committee | April 5.

economy at a severe disadvantage compared to the rest of the world. The non-partisan Congressional Budget Office has concluded that the tax rates needed to sustain the nation’s current fiscal trajectory into the future would end up sinking the economy.2 That is one reason that the Commission on Fiscal Responsibility and Reform proposed. economy. The Moment of Truth. The President’s budget would drive both spending and revenues to historic highs as a share of the total U. high wages and entrepreneurship. as part of an overall effort to fix the nation’s unsustainable deficits.000 each year on average from every taxpayer in the top two 3 The National Commission on Fiscal Responsibility and Reform. Letter to Congressman Paul D. it must adopt a program of gradual adjustment – one that frees the nation from the shadow of debt. the government would have to collect an additional $500. Ryan. http:// www.S. government revenue has averaged between 18 percent and 19 percent of GDP. May 2008. Americans have had enough instability in their lives.S.costs – are a certainty if the program goes unreformed. The trend is clear: Chasing ever-higher spending with ever-higher tax rates would leave the U. and supports robust economic growth and job creation. Figure 5 shows that Washington has a spending problem. government is not running sustained deficits because Americans are taxed too little. December Over the past 40 years.S.pdf House Budget Committee | April 5. Nor can the government solve this problem just by raising the top individual tax rates: Even if it were wise to raise taxes on the most successful small businesses in America – most of which are owned by individuals and file at individual rates – the government cannot even come close to closing the fiscal gap that way. and they deserve a federal health and retirement safety net that they can count on. even though there is broad agreement that the structure of the tax code should be simplified and made more conducive to economic growth. Taxes The U. To close the fiscal gap by raising the top rates. protects those in or near retirement from any disruptions in their benefits. on top of what these taxpayers already pay. This level has generally been compatible with prosperity. while eliminating tax loopholes to broaden the tax base. strengthens its health and retirement safety net. to say nothing of the pain felt by FIGURE 5 American families deprived of the chance to save for a better future. not a revenue problem.fiscalcommission. If Congress wants to avoid defaulting on federal health and retirement programs. 2011 16 . The government is running deficits because it spends too much. a fundamental tax reform plan that actually lowered income tax rates to promote growth.3 2 Congressional Budget Office.

The debt is the total amount outstanding that the government owes – it represents the accumulation of deficits over time. Congress must address this crisis now – before it is too late. bringing it to $26 trillion.A broader base with lower rates is central to a fair. The deficit is how much the nation has to borrow to fund the gap between spending and revenue in a given year. House Budget Committee | April 5. Deficits and Debt When the government spends more than it takes in through taxes.S. The gross debt is scheduled to hit $14 trillion. and the economic growth spurred by such a reform is a precondition to fixing the nation’s fiscal mess. which is nearly the size of the entire U. economy. 2011 17 . efficient and sustainable tax code. This year is projected to mark the third straight year in which the nation borrows over $1 trillion. it has to borrow money to cover the shortfall. The President’s budget would nearly double this debt over the next ten years. Clearly.

and when they cut up the credit cards of profligate countries.S. Some have even decided to purge their portfolios of U. 2011 18 . By contrast.cnbc. the Federal Reserve has recently become the largest buyer of government debt in the country.” Reuters with CNBC. government remains on its current unsustainable path. Congress has all the fiscal powers necessary to command a change of course. 4 “Pimco’s Biggest Fund Dumps Treasury Bond Holdings. America’s unsustainable budget path is no longer a problem that is far off in the future. in order to avoid this fate. and find it quickly. Americans have seen just how quickly a severe financial crisis can create widespread pain and chaos. This is not the future of a proud and prosperous nation.Yet decline is not inevitable. economy and ultimately capsize it if left on its present course. But it must find the will to change.4 Through its interventions into the economy. House Budget Committee | April 5. But the Fed is scheduled to stop making these purchases this summer. Congress must show the market that it has a credible plan for getting the national debt under control. Over the past few years. The lenders who buy much of the federal government’s debt have noticed the disconnect between the government’s perilous fiscal situation and the low rates of interest it is paying on the bonds that constitute the government’s loans. 2011). in order to ease concerns over the government’s credit- worthiness and stave off an interest-rate spike. BURDEN OF DEBT The United States is facing a FIGURE 6 crushing burden of debt – a debt that will soon surpass the size of the entire U. An Unsustainable Path The recent sovereign debt crises in Greece and other highly-indebted European countries provide a cautionary tale of the rough justice of the marketplace – lenders cannot and will not finance unsustainable deficits forever. 2011 http://www. severe economic turmoil ensues. and others are advising their clients to do the same. This budget is offered in the hope that it might demonstrate the new House majority’s determination to face the government’s most difficult fiscal challenges.S.S. and these purchases have helped keep interest rates 41990901/ (accessed March 31. But the last crisis was foreseen only by a small number of perceptive individuals who recognized the implications of unwise decisions being made in Washington and on Wall Street. It is the future of a nation in decline – its best days come and gone. nearly every fiscal expert and advisor in Washington has warned that a major debt crisis is inevitable if the U. March 9. The government’s failure to prevent this completely preventable crisis would rank among history’s most infamous episodes of political malpractice.

2011). That is bad news for the United States. Deficit?” USA TODAY. Interest payments are already consuming around 10 cents of every tax dollar. March 10.S. Neither of these conditions is going to last. 2010 http://www. If interest rates increase by a higher-than- expected amount in future – which appears to be more likely – then the nation’s interest payments could cost trillions of dollars more. That means that one in five tax dollars will be dedicated to making interest payments by the end of the decade – and that’s according to optimistic projections about interest rates. 2011 19 .art. particularly during a time of crisis.S. 5 Wolf.S. University of Maryland economist Carmen Reinhart testified before the Budget Committee that 90 percent is often a trigger point for economic decline. threaten to turn these recent deficit spikes into a permanent plunge into debt. combined with the coming retirement of nearly 80 million baby boomers. House. Foreigners now own roughly half of all publicly held U. Committee on the Budget. Lifting the Crushing Burden of Debt. Right now. economy this year.S. a nation’s indebtedness is best understood in terms of how much it owes relative to how much it makes. 2011. but also because the bonds of most foreign countries are looking even riskier. it is usually too late to avoid severe disruption and economic pain. Foreign flight It would be one thing if the U.S. from nearly 70 percent this year to over 87 percent of the U. government’s ability to solve its most difficult fiscal challenges. the Democratic co-chairman of the Commission on Fiscal Responsibility and Reform. If this were merely a temporary rise in the debt. debt – meaning sharply higher interest rates.S. debt held by the public – money that the U. debt. the spending spree of the last two years. By that measure. This makes the nation vulnerable to a sudden shift in foreign investor sentiment. Interest rates – and the burden of paying interest on the debt – have nowhere to go but up. especially foreign governments such as China. According to the non-partisan CBO. they will demand higher compensation to offset the perceived risk of holding U. 6Reinhart. the President’s budget would keep the debt climbing as a share of the economy in the decade ahead. Testimony before the U.S. House Budget Committee | April 5. economy by 2021. Carmen M. But as interest rates rise from their current historically low levels and debt continues to mount. a sharp increase from a generation ago when foreigners owned just 5 percent of U.htm (accessed March 31. However. “Are We Ready to Cut the U.Erskine Bowles. it would not be so alarming.S. begin to lose confidence in the U. interest payments are projected to consume over 20 percent of all tax revenue by 2020.S.” 5 Nearing a Debt Crisis Like a household or business.usatoday. Debt in excess of 60 percent of the economy is not sustainable for an extended period of time. government owed most of this money to domestic lenders. But the nation’s reliance on foreign creditors has increased dramatically over the past few decades. November 29.S.6 How a Debt Crisis Would Unfold Spiraling interest rates The first sign that a debt crisis has arrived is that bond investors lose confidence in a government’s ability to pay its debts – and by that printedition/news/20101129/1adeficit29_cv.S. debt. partly because of the Fed’s interventions in the market. If foreign investors. said it best: “The era of deficit denial is over. Hearing. government is able to borrow at historically low rates. Richard. government owes to others – will reach nearly 70 percent of the entire U. the U.

edu/ files/faculty/51_Growth_in_Time_Debt. as the heavily indebted nations of Europe have recently learned. no entity on the planet is large enough to bail out the U. and Kenneth S. Carmen M. sudden and disruptive cuts to vital programs.economics. or all three. but inflation also becomes a problem. Real pain for families Warning signs in financial markets would merely be a harbinger of the real economic pain that would eventually be felt by American families in the event of a debt crisis. credit cards and car loans. who have grown accustomed to borrowing in a climate of historically-low interest rates. the study confirmed that massive debts of the kind the nation is on track to accumulate are associated with “stagflation” – a toxic mix of economic stagnation and rising inflation.S. Much higher interest rates on government debt would translate into much higher interest rates on mortgages. and this helped keep interest rates low.harvard. the nation would still be in for a long and grinding period of economic decline if it stays on its current path.” January 2010. This would create a huge hole in the economy that would be exacerbated by panic.pdf House Budget Committee | April 5. runaway inflation. foreign investors will re-evaluate the creditworthiness of the United States and demand higher interest rates. Rogoff. “Growth in a Time of Debt. 7 Reinhart. But these investment flows work both ways. The Consequences of Inaction Stagflation The economic effects of a debt crisis on the United States would be far worse than what the nation experienced during the financial crisis of 2008. If the Congress continues to put off difficult choices regarding the nation’s long-term problems. Even if high debt did not cause a crisis. For starters. focusing on growth and inflation relative to past periods when this nation has experienced high debt levels. A recent study completed by Reinhart and economist Ken Rogoff of Harvard confirms this common-sense conclusion. the only solutions to a debt crisis would be truly painful: massive tax increases. 2011 20 . The study found conclusive empirical evidence that total debt exceeding 90 percent of the economy has a significant negative effect on economic growth. foreigners flocked to Treasury debt simply because other investments looked so unsafe by comparison. http://www. Essentially. government. Absent a bailout.FIGURE 7 During the financial crisis. however. The study found that not only is average economic growth dramatically lower when gross U.S. debt exceeds 90 percent of the economy. These higher rates would most likely come as a shock to most Americans.7 The study looked specifically at the United States. It might even shock those who lived through the double-digit interest rates of the early 1980s.

which accounts for nearly 70 percent of the U. as their funding costs were rising. household debt. households are still heavily indebted. government were forced to address such a situation by cutting domestic spending and raising taxes to close the budget gap. 2011 21 . hitting seniors the hardest. while the rest is in credit cards and other forms of debt. it becomes harder for the government to raise revenue through taxes. this would mean punishing seniors twice. without regard for the economic consequences. A large chunk of that total debt consists of home mortgages.S. it will be forced to make immediate and painful fiscal adjustments (like the austerity program that has provoked riots in Greece). and tax rates would be raised across-the-board.000 per year.S. Harsh austerity As economic growth deteriorates. or roughly 120 percent of their total disposable income. Monetizing the debt.) would be slipping as consumer spending tailed off. causing a deterioration of the balance sheets of large financial institutions. economy.S. Facing the inability to borrow at a reasonable rate in the market. growth in overall consumer spending. According to the current level and composition of U. Financial system breakdown The U. would decline. and the inevitable result would be less business expansion and higher unemployment. it would be compelled to do so indiscriminately. House Budget Committee | April 5. The resulting panic would be orders of magnitude more disruptive than the financial crisis in 2008. meaning that a sudden increase in Treasury bond rates would lead to higher borrowing costs for consumers relatively quickly. dollar is the world’s reserve currency. meanwhile. Real pain for businesses Higher borrowing costs would also serve as a serious impediment for businesses. demand for their products (particularly consumer durables bought on credit like cars. and the global economy. home furnishings. and a vicious cycle ensues. U.S. When combined with benefit cuts. In such a crisis. considered to be safe and highly liquid assets by virtually all financial institutions worldwide. A U. The consequences of these actions would be disastrous for the U. the added interest costs for the typical family could easily exceed $1. If the nation ultimately experiences a panicked run on its debt. the government would have to slash spending and raise taxes to narrow its large fiscal gap.S.Despite the increase in saving rates that has occurred in the wake of the financial crisis. Treasury bonds are the lynchpin of global debt markets. estimates suggest that an interest rate increase of just 1 percentage point would lead to over $400 in extra interest payments each year for the average family. Businesses would be doubly squeezed because. Promises to current retirees would be broken. etc. Add in higher taxes from a cash-strapped government trying to appease its creditors. This would wipe out the savings of millions of Americans.S. It turns out that roughly half of all that debt is in the form of variable interest rate loans.S. If the U.S. would soon lead to a destabilizing inflation. The nation’s households still owe $13 trillion in private debt. As household borrowing costs spiked. debt crisis would lead to sharp declines in the dollar and in the price of these bonds. and U. The rise in interest rates would lead to lower business investment as companies would face a much higher hurdle for profitability on potential expansion plans. Given that a serious debt crisis could lead to a sharp increase in Treasury rates. the Fed may also face rising pressure to step in and “monetize” the government’s debt – essentially printing money to buy up the public debt that private investors refuse to finance.

yearly interest expenses will be double national defense spending. If it stays on its current fiscal path. The new House majority was sent here by the American people to get spending under control. debt is not just about dollars and cents.” 8 America must not lose its role in the world. interest payments on the national debt will begin to exceed yearly defense spending just 11 years from now.The Path to Decline In the end. or it can begin – today – the work of restoring the vitality and greatness of America. financial historian Niall Ferguson surveyed some of the great empire declines throughout history and observed that “most imperial falls are associated with fiscal crises. the United States will be unable to afford its role as an economic and military superpower. March/ April 2010. but also about America’s status as a world power and its freedom to act in its own best interests. Congress can choose to let this nation go the way of fallen empires. keep taxes low. Alarm bells should be ringing loudly… [for] the United States. as well as difficulties with financing public debt.” Foreign Affairs. If the nation stays on its current path. Congress must act now to change the nation’s fiscal course. Niall. the debate about rising U. In just 16 years. 8Ferguson. All the… cases were marked by sharp imbalances between revenues and expenditures. House Budget Committee | April 5. and confront these great challenges today to allow this generation to pass an even greater nation along to the next generation. “Complexity and Collapse: Empires on the Edge of Chaos. Other nations with very different interests will rush in to fill that role. Last year in Foreign Affairs magazine.S. 2011 22 . For this and many other reasons.

Ending corporate welfare: There is a growing and pernicious trend of government overreach into sectors of the private economy – a trend that stacks the deck in favor of entrenched interests and stifles growth. it usually doesn’t do any of them very well. House Budget Committee | April 5. The last Congress added trillions to the problem.S. This budget locks in savings with enforceable spending caps and budget process reforms. it reflects the $178 billion in savings identified by Defense Secretary Robert Gates. 1. This budget offers America a model of government guided by the timeless principles of the American Idea: free market democracy. effective and responsible The role of the federal government is both vital and limited. This budget achieves savings in the category of national defense without jeopardizing preparedness or critical missions. $100 billion of which would be reinvested in higher combat priorities. liberty and the pursuit of happiness. It targets hundreds of government programs that have outlived their usefulness. while fostering an environment for economic growth and private sector job creation. There is a vacuum of leadership in Washington. and unlocks American energy production to help lower costs. And it repeals the government takeover of health care enacted last year and moves toward patient-centered reform. addressing not only what Washington spends. create jobs. In certain key respects. This budget removes moratoriums on safe. It reflects an extension of the moratorium on earmarks. This budget offers a set of fundamental reforms to put the nation back on the right track. This budget recommits the federal government to the security of every American citizen’s natural right to life. This budget starts to restore spending discipline to a government that badly needs it by returning non-security discretionary spending to well below 2008 levels. responsible energy exploration in the United States. GOVERNMENT When it comes to this generation’s defining challenge – the explosive growth of the national debt – the simple truth is that Washington has not been honest with the American people. and reduce dependence on foreign oil. the federal government has strayed from these timeless principles. but also how tax dollars are spent. This budget ends the taxpayer bailouts of failed financial institutions and stops Washington from picking the winners and losers across sectors of the economy. To do otherwise would consign the United States to a diminished future – a future that disrespects the sacrifices that generations of American families have made to secure the promise of this exceptional nation. It reduces the bureaucracy’s reach by applying private-sector realities to the federal government’s civilian workforce. a secure safety net. across-the-board cuts in funding for national defense. and equal opportunity for all under a limited constitutional government of popular consent. this budget rejects proposals to make deep. A REFORM AGENDA FOR THE U. Reform government to make it more efficient. Boosting American energy resources: Too great a percentage of America’s vast natural resources remain locked behind bureaucratic barriers and red tape. open competition. ends Washington policies that drive up gas prices. with much of the money going to programs and projects the nation can do without. 2011 23 . a robust private sector bound by rules of honesty and fairness. and the current administration has offered no serious plan to address the sea of red ink. Instead. This budget attempts to lead where others have fallen short. Changing Washington’s culture of spending: The budget process in Washington contains numerous structural flaws that bias the federal government toward ever-higher levels of spending. too fast over the past decade. Limited government also means effective government. American men and women in uniform are presently engaged with a fierce enemy and dealing with emerging threats around the world. Streamlining other government agencies: Government spending on domestic departments and agencies has grown too much. When government takes on too many tasks. Providing for the common defense: Recognizing that the first job of government is to secure the safety and liberty of its citizens from threats at home and abroad.

growing private sector. who will receive the benefits they’ve organized their retirements around. The framework established in this budget secures health and retirement benefit programs both for current beneficiaries. in turn. This budget improves incentives for job creators to work. Advancing Social Security solutions: The risk to Social Security. invest. This budget saves Medicare by fixing this flawed structure so that the program will be there for future generations. It strengthens Medicaid. driven by demographic changes. These changes will not affect those in and near retirement in any way. Reform government programs to fulfill the mission of health and retirement security This budget puts an end to empty promises from a broke government. Preparing the workforce for a 21st century economy: The government’s dozens of job-training programs suffer from overlapping responsibilities and too often lack accountability. threatening to bankrupt the system – and ultimately the nation. 3. Corporate tax reform: American businesses labor under the highest corporate income tax in the developed world. This budget embraces the widely acknowledged principles of pro-growth tax reform by proposing to consolidate tax brackets and lowers tax rates. This budget ends an onerous. clearing out the burdensome tangle of loopholes that distort economic activity. Reform welfare to strengthen the social safety net This budget builds upon the historic progress of bipartisan welfare reform in the late 1990s. This budget consolidates a complex maze of dozens of job-training programs into more accessible. food stamps and job training programs by providing states with greater flexibility to help recipients build self-sufficient futures for themselves and their families. This budget extends those successes to other areas of the safety net to ensure that America’s safety net does not become a hammock that lulls able-bodied citizens into lives of complacency and dependency. Saving Medicare: A flaw in Medicare’s structure is driving up health care costs. Individual tax reform: The current code for individuals is too complicated. The government must do a much better job of leveraging and targeting existing resources in this policy area. Repairing a broken Medicaid system: Medicaid’s flawed financing structure has created rapidly rising costs that are nearly impossible to check. one-size-fits-all approach by converting the federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to the needs of their unique populations. Reform the tax code to promote economic growth and job creation This budget recognizes that the nation’s fiscal health requires a vibrant.2. House Budget Committee | April 5. and for future generations. The perverse incentives created by the corporate income tax do a lot of damage. It charts a prosperous path forward by reforming a tax code that is overly complex and unfair. enjoying the same kind of choices in their plans that members of Congress enjoy today. Medicare would then provide a payment to subsidize the cost of the plan. who will inherit stronger programs they can count on when they retire. Medicare will provide increased assistance for lower-income beneficiaries and those with greater health risks. offering instead real security through real reforms. 4. When younger workers become eligible for Medicare. Reform that empowers individuals — with a strengthened safety net for the poor and the sick — will guarantee that Medicare can fulfill the promise of health security for America’s seniors. yet the tax itself raises relatively little revenue. with high marginal rates that discourage growth. they will be able to choose from a list of guaranteed coverage options. is nearer at hand than most acknowledge. with a top rate of 25 percent. 2011 24 . This budget heads off a crisis by forcing action from the President and both chambers of Congress to ensure the solvency of this critical program – creating the space for bipartisan solutions. In addition. which are. accountable career scholarships aimed at empowering American workers with the resources they need to pursue their dreams. Targeting assistance to those in need: The welfare reformers of the 1990s were not able to extend their work beyond cash welfare to other means-tested programs. and innovate in the United States by lowering the corporate rate from 35 percent to a much more competitive 25 percent.

rediscovers her abiding principles. It marks a new federal commitment. and weaken its national identity in ways that may not be reversible. and lenders that the new House majority recognizes the threat that unlimited government poses to the American way of life. the nation’s crushing burden of debt jeopardizes this legacy. more prosperous and free America. From the beginning. gradual moral-political decline as dependency and passivity weaken the nation’s character and as the power to make decisions is stripped from individuals and their elected representatives and given to non-elected bureaucracies. investors. America is drawing perilously close to a tipping point that has the potential to curtail free enterprise. Restoring limits to the size and scope of government is not a partisan issue. In this we face two dangers: long-term economic decline as the number of makers diminishes and the number of takers grows and. Today. and that it is determined to fulfill its commitments and responsibly restrain government’s growth. This generation’s defining moment has arrived. This generation must not be the first generation to fail – to break the link between our past. a subtle destroyer of the human spirit… It is in violation of the traditions of America. This budget provides a plan for assuring that this generation upholds America’s historic legacy. savers. Americans have selflessly tackled the difficult challenges before the republic. our present and our future. President Franklin Roosevelt – in words later repeated by President Ronald Reagan – warned of the threat to America’s national character from permanent dependency on government: The lessons of history. or military threats from abroad. While an important statement of priorities. assuring this nation’s workers.To dole out relief in this way is to administer a narcotic. Americans truly face a monumental choice – a choice that can no longer be avoided. whether civil war. show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. and each generation has found strength in America’s highest principles and called forth its deepest virtues to make certain that the next generation inherited a stronger. The elected representatives of the American people – in the House of Representatives.The Choice Throughout history. transform its government. Each generation has been tested. In his State of the Union Address on January 4. worse. and charts a new path to prosperity. economic depression. The Path to Prosperity is the groundwork for a serious conversation about the future of this exceptional nation. House Budget Committee | April 5. 2011 25 . yet defined by great courage and achievement in monumental efforts. in the Senate and in the White House – now must take up the tools and start building the future Americans deserve. 1935. a budget is merely a blueprint for the actual work of statecraft. our nation has been marked by hardship. confirmed by the evidence immediately before me. The Path to Prosperity charts a different course.

7 DEFICIT 9.354 34.071 n.6 17.3 2.589 3.1 22.8 74.326 13.9 20.9 17.860 3.377 3.533 2.237 3.958 REVENUES 2.3 4. S-­‐1 FY2012  CHAIRMAN'S  MARK (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-­‐2021 OUTLAYS 3.1 17.9 19.230 2.8 17.7 19.4 2.9 18.0 18.0 19.6 2.801 13.3 17.9 17.998 4.a.5 71.745 3.9 1.388 -­‐995 -­‐699 -­‐492 -­‐434 -­‐481 -­‐408 -­‐379 -­‐414 -­‐402 -­‐385 -­‐5.9 2.352 4.559 3.351 11.800 15.094 3.529 3.123 4.7 67.7 DEBT  HELD  BY  THE   68.939 4.671 3.544 4.681 16.8 16.8 1.5 REVENUES 14.9 19.8 68.088 DEBT  HELD  BY  THE   10.7 70.2 20.0 1.5 21.6 PUBLIC .7 20.2 72.739 39.886 14.2 6.4 17.870 DEFICIT -­‐1.217 12.142 4.2 20.5 71. PUBLIC AS  A  SHARE  OF  GDP 10-­‐YEAR 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 AVERAGE OUTLAYS 24.618 3.8 1.363 14.8 72.7 69.418 12.254 15.5 74.858 3.586 3.2 73.2 18.5 2.8 20.

033 -­‐1. PUBLIC FY2012  CHAIRMAN'S  MARK  VS. PUBLIC .406 -­‐1.  CBO  BASELINE (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-­‐2021 OUTLAYS -­‐11 -­‐110 -­‐220 -­‐368 -­‐510 -­‐602 -­‐664 -­‐733 -­‐796 -­‐869 -­‐941 -­‐5.890 -­‐2.812 REVENUES 0 -­‐25 -­‐227 -­‐346 -­‐406 -­‐448 -­‐482 -­‐527 -­‐544 -­‐561 -­‐597 -­‐4.450 -­‐3.214 REVENUES 0 -­‐11 -­‐39 -­‐118 -­‐206 -­‐258 -­‐228 -­‐249 -­‐240 -­‐240 -­‐243 -­‐1.  PRESIDENT'S  BUDGET (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-­‐2021 OUTLAYS -­‐37 -­‐179 -­‐241 -­‐390 -­‐520 -­‐618 -­‐690 -­‐773 -­‐848 -­‐939 -­‐1.831 DEFICIT -­‐38 -­‐169 -­‐202 -­‐272 -­‐314 -­‐360 -­‐461 -­‐524 -­‐608 -­‐699 -­‐773 -­‐4.877 -­‐4.511 -­‐1.938 n.382 DEBT  HELD  BY  THE   -­‐38 -­‐243 -­‐443 -­‐715 -­‐1.139 -­‐1.a. S-­‐2 FY2012  CHAIRMAN'S  MARK  VS.110 -­‐3.a.735 n.649 DEBT  HELD  BY  THE   -­‐11 -­‐98 -­‐94 -­‐118 -­‐229 -­‐396 -­‐601 -­‐840 -­‐1.162 DEFICIT -­‐11 -­‐86 7 -­‐21 -­‐104 -­‐154 -­‐182 -­‐206 -­‐251 -­‐308 -­‐344 -­‐1.016 -­‐6.

060 TOTAL  OUTLAYS 3.236 GLOBAL  WAR  ON   76 118 93 65 54 51 50 50 50 50 50 630 TERROR NON-­‐SECURITY 565 482 435 416 404 396 395 396 402 410 422 4.998 4.124 1.667 MEDICARE 563 560 601 636 666 720 748 776 839 893 953 7.952 NET  INTEREST 212 256 318 387 448 507 558 600 634 666 687 5.159 MEDICAID 275 259 262 248 243 252 263 265 280 291 305 2.618 3.058 1.352 4.266 9.863 OTHER  MANDATORY 489 410 373 309 270 279 264 242 267 268 269 2.194 1.529 3.671 3.858 3.559 3.586 3.739 39.958 . S-­‐3 FY2012  CHAIRMAN'S  MARK  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021-­‐2022 SECURITY   711 683 679 686 697 714 725 736 757 772 788 7.544 4.123 4.392 PRESIDENT'S  HEALTH   0 0 0 0 0 0 0 0 0 0 0 0 CARE  LAW SOCIAL  SECURITY 727 760 799 841 888 939 995 1.

403 SOCIAL  SECURITY 0 0 0 0 0 0 0 0 0 0 0 0 OTHER  MANDATORY -­‐2 -­‐42 -­‐46 -­‐48 -­‐78 -­‐82 -­‐82 -­‐83 -­‐82 -­‐85 -­‐87 -­‐715 NET  INTEREST 0 -­‐1 -­‐4 -­‐7 -­‐15 -­‐27 -­‐42 -­‐58 -­‐76 -­‐97 -­‐119 -­‐446 TOTAL  OUTLAYS -­‐11 -­‐110 -­‐220 -­‐368 -­‐510 -­‐602 -­‐664 -­‐733 -­‐796 -­‐869 -­‐941 -­‐5.  CBO  BASELINE  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021-­‐2022 SECURITY 4 28 25 27 27 26 24 21 17 12 8 214 GLOBAL  WAR  ON  TERROR 2 -­‐10 -­‐58 -­‐95 -­‐111 -­‐119 -­‐122 -­‐126 -­‐130 -­‐134 -­‐138 -­‐1.044 NON-­‐SECURITY -­‐15 -­‐79 -­‐117 -­‐136 -­‐152 -­‐166 -­‐177 -­‐188 -­‐196 -­‐202 -­‐204 -­‐1.617 MEDICAID 0 -­‐1 -­‐13 -­‐45 -­‐63 -­‐73 -­‐82 -­‐102 -­‐112 -­‐131 -­‐150 -­‐771 MEDICARE 0 0 1 3 4 3 0 -­‐3 -­‐9 -­‐14 -­‐17 -­‐30 PRESIDENT'S  HEALTH  CARE  LAW 0 -­‐6 -­‐9 -­‐66 -­‐122 -­‐164 -­‐182 -­‐194 -­‐208 -­‐219 -­‐233 -­‐1.  PRESIDENT'S  FY2012  BUDGET  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021-­‐2022 SECURITY 0 0 0 0 0 0 0 0 0 0 0 0 GLOBAL  WAR  ON  TERROR 0 0 0 0 0 0 0 0 0 0 0 0 NON-­‐SECURITY -­‐14 -­‐72 -­‐79 -­‐78 -­‐83 -­‐90 -­‐95 -­‐102 -­‐105 -­‐113 -­‐106 -­‐923 MEDICAID 0 -­‐1 -­‐14 -­‐44 -­‐61 -­‐69 -­‐77 -­‐97 -­‐106 -­‐125 -­‐140 -­‐735 MEDICARE 0 -­‐12 -­‐22 -­‐25 -­‐28 -­‐32 -­‐38 -­‐44 -­‐54 -­‐63 -­‐71 -­‐389 PRESIDENT'S  HEALTH  CARE  LAW 0 -­‐6 -­‐9 -­‐66 -­‐122 -­‐164 -­‐182 -­‐194 -­‐208 -­‐219 -­‐233 -­‐1.214 .403 SOCIAL  SECURITY -­‐14 0 0 0 1 1 1 2 2 2 2 11 OTHER  MANDATORY -­‐7 -­‐85 -­‐106 -­‐155 -­‐186 -­‐199 -­‐205 -­‐212 -­‐216 -­‐221 -­‐225 -­‐1.812 FY2012  CHAIRMAN'S  MARK  VS.016 -­‐6.810 NET  INTEREST -­‐2 -­‐4 -­‐10 -­‐22 -­‐41 -­‐64 -­‐93 -­‐125 -­‐161 -­‐200 -­‐244 -­‐965 TOTAL  OUTLAYS -­‐37 -­‐179 -­‐241 -­‐390 -­‐520 -­‐618 -­‐690 -­‐773 -­‐848 -­‐939 -­‐1. S-­‐4 FY2012  CHAIRMAN'S  MARK  VS.

S-­‐5 CHAIRMAN’S  MARK  VS  STATUS  QUO CBO  LONG-­‐TERM  ANALYSIS PROJECTED 2022 2030 2040 2050 CHAIRMAN'S  MARK TOTAL  REVENUES 18  ½ 19     19     19     TOTAL  SPENDING 20  ¼ 20  ¾ 18  ¾ 14  ¾ DEFICIT  (-­‐)  OR  SURPLUS -­‐2 -­‐1  ¾ ¼ 4  ¼ DEBT  HELD  BY  THE   70 64 48 10 PUBLIC ALTERNATIVE  FISCAL  SCENARIO TOTAL  REVENUES 19  ¼ 19  ¼ 19  ¼ 19  ¼ TOTAL  SPENDING 26  ¾ 32  ¼ 38  ½ 45  ¼ DEFICIT  (-­‐)  OR  SURPLUS -­‐7  ½ -­‐13     -­‐19  ¼ -­‐26     DEBT  HELD  BY  THE   95 146 233 344 PUBLIC .

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